Food-delivery pioneer spends more to reach new diners
Grubhub on Tuesday reported lower profit and cut its revenue expectations for this year as it spends more to acquire new diners amid mounting competition among food-delivery companies.
The company is facing rising competition from rivals, particularly DoorDash Inc. That company has struck restaurant deals and raised billions of dollars in investment recently, fueling a rapid expansion across much of the U.S.
Grubhub said orders were up and diners bought more frequently during the quarter ended in June. Executives said they are working to improve efficiency, but also pushing into smaller, less dense markets that tend to be more expensive to serve.
…DoorDash’s recent restaurant partnerships include a pilot with McDonald’s Corp.in Houston. Uber Eats, the food-delivery arm of Uber Technologies Inc., said last week it will deliver from Starbucks Corp.locations across the U.S. by the end of the year, and said Tuesday that it had struck a deal with White Castle System Inc. to shuttle sliders from more than 330 locations.
Grubhub executives said their rivals have grown rapidly in part by obscuring their service fees from customers. DoorDash and other services have spent heavily on free delivery and promotions to help nab business and launch diner subscription programs.
“We see a lot of activity that’s being funded by late-stage
money,” Grubhub Chief Executive Matt Maloney said in an interview.
As competition increases, restaurants are asking for more from food-delivery services, including rate reductions and easier integration into their operations. Grubhub has had to boost its advertising and promotional spending to compete.
Food-delivery companies are also navigating increasing regulatory scrutiny. Grubhub has faced questions over its policies for collecting fees from restaurants, particularly independent ones that drive the bulk of its business.